BNP says sell Hungarian forint

Investors should sell the Hungarian forint because it will return to its record low against the euro this year as the nation's economy slows, according to BNP Paribas Securities SA. The Hungarian currency has rallied about 2.5% against the euro since June. It benefited last week amid anticipation of the central bank's decision to raise interest rates 28 August. The central bank raised the country's benchmark lending rate to 7.25% 28 August from 6.75%. The forint is still down 8.7% this year. Hungary's economy grew at the slowest pace in more than a year last quarter. „It is time to sell the currency on any rally,” said Elisabeth Gruie, an emerging-market currency strategist at BNP Paribas SA in London, in a phone interview Aug. 25. Weaker economic growth is „a clear hindrance” to the currency, she said. The forint advanced 0.6% to 276.38 per euro 28 August. It reached a record low of 285.15 per euro on June 20. The euro debuted in January 1999. Hungary's currency may slide to 285 per euro by year-end, according to Gruie.

The nation's inflation will reach 7% next year and slow to 4.2% by 2008, the central bank said 28 August. Annual inflation is forecast at 3.8% this year. Hungary's borrowing costs are the highest in the European Union. The economy grew at the slowest pace since the Q1 of 2005 in the April-to-June period, advancing 3.6% from the same period last year, the Budapest-based statistical office said on Aug. 15. The annual rate slowed from 4.6% in the previous three months. Hungary's economic growth is the slowest in eastern Europe. Consumer confidence fell to the lowest in a decade in July amid plans by the government to raise some taxes and cut spending to restrain a growing budget deficit, according to research institute GKI. The forint got a boost last week after the government approved the first draft of the country's euro-entry plan. Hungary may adopt the euro between 2011 and 2013, Finance Minister János Veres said on Aug. 25. Hungary last month gave up on plans to switch to the euro by 2010 after acknowledging it will fail to shrink its deficit enough to meet rules for joining the euro area. (Bloomberg, vg.hu)